Euphoria Telecoms was launched from a living room. It was bootstrapped by founders George Golding and Conrad de Wet who promptly spent all of their start-up cash on a bad PABX software system from the US and had to start over.

It took them six years to build a R45 million business, and one year to take that to R65 million. Here are their rules for laying the right foundations and following the best strategies for high-level growth.

Rule 1: Solve a need

This sounds obvious, and yet it’s the cornerstone of successful businesses, and lacking in so many businesses that don’t make it past start-up phase.

Euphoria Telecom is actually George and Conrad’s second business together. Their first was a merging of both their previous businesses. Having met while delivering pizzas as students, George and Conrad ran into each other a few years later, and realised the start-ups they had launched independently of each other would work well together; George was often asked if he did web development by his clients, and Conrad’s clients frequently requested visual production and photography. Together they could offer all three, and they soon worked with a number of large clients, including FNB, SABC Women of the Year Awards and Home Choice.

The business didn’t work out, as a third partner tried to move in a different direction, but the experience gave George and Conrad a valuable gift: They had worked within the South African market as an SME, which offered insight into the biggest pain points SMEs suffered. This in turn gave them an idea for a different business; one that would solve a real need.

“In 2004, VOIP didn’t exist. Companies were trying to push it into the market, but it wasn’t working,” says George.

“We knew this because it had been a big problem for us. We wanted to buy a PABX system, but we couldn’t find one that didn’t come with a three to five-year contract. On top of that were maintenance costs, and if you wanted to scale there were additional costs, you were capped at lines and problems were expensive to fix. As an SME we didn’t want to commit to any of it. The risk was too high.”

They didn’t get a PABX system, but they recognised an opportunity to offer the right solution for SMEs.

“When we started discussing the possibility of launching a new business together, this was the solution we focused on,” says Conrad. “It didn’t just draw on our skills, as our previous businesses had — it was solving a real need in a way that no other companies were.”

But they needed to move quickly. “The buzz word was the Cloud. South Africa was still a few years away from wide-scale adoption, but we knew it would eventually become the status quo, and we needed to have the right product when it did.”

A Cloud-based solution would be more affordable for SMEs because it didn’t require a PABX system in the office; everything would run off a software solution with a VOIP switch. This made it scalable, cost efficient and easy to manage. The only problem was finding the solution.

“We identified solutions in the US where you could choose three or 100 users at the click of a button. You could set it up online, switch your package on and off — there was nothing like it available here,” says Conrad.

“We decided to take the US model, work on it, and create something of a similar standard. We felt inspired; we were doing something that solved a significant problem.”

To get started, George and Conrad invested everything in an off-the-shelf product from the US. “The decision had been whether to build it or buy it, and we decided to buy it — and then we discovered it was a bad product. We realised we needed to develop a platform through open source technology, and build it from the ground up.”

Conrad and George still needed to educate their target market on how Cloud worked and the benefits of a Cloud-based VOIP system, but they had a product they knew the market needed — and that was a start.

The rule in action: If you aren’t solving a problem, your business might remain operational for a number of years, but you’ll find it difficult to scale. Whether you’re a start-up or operational, keep thinking about your market: Do they need your solution, and does it significantly improve their circumstances?

Rule 2: Have the right partnership in place

“Partnerships are essential,” says Conrad. “No one person can do it all. You need to work together with complementary skill sets. We both have strengths and weaknesses, but they’re different, and so we don’t clash.”

Conrad’s strengths are tech product building, engineering and development architecture. George is excited by what he can do with that technology commercially. In other words, the business has a tech guy and a sales guy, which according to most venture capitalists is all a business needs: Someone to make the product, and someone to sell it.

Success lies in how well those partners operate together, and whether they respect each other, because two people will never be in agreement 100% of the time. “Tech guys are excited by their technology. When they figure out something new, or add a new feature, they want to give it to everybody,” says George. “As the sales guy, I have to hold him back. We’re running a business. That means we sell our products; we don’t give them away for free.”

On the other side of the coin, George is in the market, learning about customers needs, and he’ll often go to Conrad with ideas, that if implemented immediately, could be highly profitable. But, as the tech guy, Conrad has to say no, keeping the team focused. “We understand and respect our different roles, and know that we both work in the best interest of the business,” says Conrad.

The rule in action: It’s impossible to always be in agreement with your partner. For many business owners, the solution is to be a solo entrepreneur, but as investors point out, partnerships are much stronger, because you can develop a balance of skills. To make a partnership work, you need to respect each other’s opinions and decisions, and have clear demarcations of areas in the business where one partner’s decisions are final.

Rule 3: Stay focused, no matter what

The reason Conrad says no to some customer requests is to keep the business true to the vision. “We can generally deliver what customers want but if we go straight there, we’re ultimately hobbling ourselves, he explains.”

“Our long-term vision requires a number of steps to happen first. We will get there, but on a much better platform if we don’t rush the process. It’s easy to give in to market demand, and have your development team constantly making quick fixes, but these create walls that make the product unscalable and uniterative down the line, and that’s the opposite of our vision. Our solutions are developed with 100 000 customers in mind, not 100.”

For Euphoria, focus has worked. The partners also resisted selling fibre. “PABX systems are complicated. To offer good service, you need training and support staff. We didn’t want to dilute this focus.”

Instead, the business partners with connectivity companies that offer Euphoria’s voice solution when they instal fibre, and vice versa.

“We work in parallel,” says George. “They know their network, and we know ours. Plus, they were doing it. Why staff up and do it ourselves, when this isn’t our focus? We have a niche solution that we don’t want to dilute.”

The rule in action: This is one of the hardest business rules to follow. It’s tempting to say yes to customer requests if customer centricity is built into your business model. But if you know your niche, stick to it and stay focused. No businesses are equally good at everything. Great businesses are very good at only a handful of things because they know how to stay focused and build excellent products and solutions.

Rule 4: Empower your clients

Customers gravitate towards solutions that offer one or more of these four key things: They empower them, they simplify their lives, or they make or save them money.

Euphoria’s solution is designed to offer at least three of these decision factors, but empowering customers and simplifying their lives is at its centre.

“The first decision we made was to take contracts out of the equation,” says George. “If we need contracts to keep our clients, we aren’t delivering the right solution. We want to keep customers because we have the best solution, not because we’ve locked them in.”

This decision has empowered customers in their decision-making, but Euphoria has taken it a step further. “The solution is designed as a dashboard on your desktop, in real time, so that a business owner or manager can monitor their phone lines and how much they’re spending. They can also change on-hold music and messages at the click of a mouse. They have control over the entire system and their spend,” says Conrad.

“The Internet empowers you,” adds George. “You can action anything immediately. Once people have that experience, they can’t go back. Imagine you were told to delete your banking app or online banking and do all transactions from an ATM. Would you do it? We’ve done that for the PABX. It took some time, because our solutions were ready before South Africa’s high-speed Internet infrastructure was in place, but we knew widespread Cloud adoption was coming, and we were ready for it when I did.”

The rule in action: Old school business thinking dictates that a customer should be utterly reliant on your solution to ensure customer loyalty. In truth, this level of reliance on another brand makes people uncomfortable and trapped. Instead, focus on providing solutions that give your customers complete control. Ensure there are no hidden costs, that customers feel empowered, and that their lives are simplified, and you’ll foster customer loyalty.

Rule 5: The right people can make a business

“We’ve learnt that a large part of how you treat your employees starts with your own vision and goals. If you’re only driven by profits, this will be transferred to your employees,” says George.

“But if you have a greater purpose, and you want to solve a problem, that becomes the centre of the culture shaping the business.

“The people we hired aligned with our mission. We’re ethical, honest and transparent — we always tell our customers the truth. We’ve found that as long as we are completely clear about who we are, and what our goals are, money becomes a reward instead of a goal, and we attract like-minded people.”

Placement is another key focus. George and Conrad understand how their own passions and abilities define the commitment they make to their roles, and they promote this philosophy with employees. “When someone is inspired, they go for it — get them in the right role and they’ll fly. It’s how we treat ourselves, and how we hire,” says George.

Today Euphoria has offices in Cape Town and Johannesburg, and a lean focus has remained essential. “We would rather improve efficiencies and keep our staff compliment low so that everyone has a bigger share of the rewards,” says George.

“We’re constantly improving our back-end, and this opens a lot of capacity for us.”

The rule in action: Businesses are not built in isolation. They’re the culmination of the vision and energy of founders, and the ability of employees to execute that vision. Get the right people on board, and retain their loyalty, and you have the foundations of a great business.

Rule 6: Cash is king

George has two key rules when it comes to cash flow. First, if the market doesn’t accept your price point, it’s not a sustainable business and you need to rework your model. However, make sure you know your value and your worth, and then price accordingly — without offering massive discounts. If your price is right, target customers who value what you’re offering.

“Customers have left us before for price,” admits George. “But they come back for service. They even ask us why we didn’t stop them from leaving.”

The second rule involves cash flow and billing. “Growth can damage a business if you aren’t paying attention to your cash flow,” says George. “You make sales, but suppliers need to be paid, and before your cash is in the bank, you’re paying other people, and end up in negative cash flow. The more you sell, the more it costs you.”

George and Conrad have followed a few simple principles. They always negotiate the best terms possible with their suppliers, and they have fixed payment terms with their customers. All accounts must be prepaid, or settled within two weeks of receiving an invoice.

“We say no to customers who don’t agree to a debit order or won’t do upfront payments,” says George. “We’d rather turn away business than break this rule. It’s the foundation of our business and how we’ve been able to fund our own growth.”

In return, customers get full transparency into their accounts and the ability to manage expenses on their dashboards. There are no hidden costs or surprises, and Euphoria to Euphoria calls are free.

The rule in action: Focus on getting your income into the bank before you pay your suppliers. Always have more cash than what you’re selling — sales have a cost. Get next month’s income in before making payments. To achieve this, you need good terms with your suppliers, and an efficient billing system. Put the right system in place to ensure all invoices are sent timeously and that they’re correct. This is the foundation of your business’s health and ability to grow.

Key Insights

No one cares about fancy products; they care if you’re solving a need

Often, the best way to develop a solution is to solve a need you experienced yourself. As long as you’re solving a real need, your business is relevant.

Say no to business if it’s not your core focus

Saying no to money is tough — particularly if customers are asking you for solutions you know you can develop. Learn from Apple. When Steve Jobs took over in 1997, one of the first things he did was reduce the company’s product line by 70%.

Apple had been producing multiple versions of the same product to satisfy requests from retailers. His rule? Deciding what not to do is as important as deciding what to do.

Make it easy for customers to leave and they’ll come back

Euphoria doesn’t lock customers into contracts — but they do have non-negotiable payment terms, exceptional customer service levels and a price point that ensures they can deliver that level of service.

When customers leave because they don’t want to pay upfront or have their accounts debited, or because someone offers them a cheaper package, they invariably come back with a new appreciation of what they’re paying for.

How To Adapt And Thrive Like Arnoux Maré of Innovative Solutions Group

Arnoux Maré is a quintessential entrepreneur. Not only is he wildly competitive (if his business doesn’t triple its own annual projections and targets he’ll review the company top to bottom), but he’s also re-engineered the art of ‘adapt or die’ to, ‘adapt and thrive’.

In 2011 Arnoux launched a labour consultancy with R500 that grew into a staff outsourcing company. By 2013, recognising the inherent issues in his industry, he completely reworked his business model to create a solution that employers, employees and trade unions alike could benefit from and support.

Not only did this move allow the business to survive — it’s thrived. Within one year he grew his turnover from R20 million to R32 million. Four years later and Innovative Solutions Group has hit the R780 million turnover mark. Here’s how he did it.

The start-up

Be brave, believe in your idea and sell your vision

Imagine waking up at 6am and spending the next 12 hours on the road between Pretoria, Johannesburg and Middelburg in Mpumalanga, knocking on doors and trying to sell your services. At 6pm you return home (aka your office), spend time with your infant daughter, and then sit down to study by 9pm. By 3am you’re able to crawl into bed, catch a quick three hours of sleep, and by 6am the alarm is going off and you’re up, out the house and doing it all over again.

This was Arnoux Maré’s life for nine months. In 2011 he started his business with R500, which was all he had left of his salary after paying his bills. It was a big move. He was leaving the safety of corporate employment, but he knew he wanted more, and that the only way he would achieve his goals was to do it for himself.

“I had a list of SMEs I wanted to target. Corporates have HR and payroll divisions filled with human capital specialists. SMEs do not. After five years in corporate I’d seen the common HR problems we faced. I particularly believed SMEs needed this solution. Human capital is a specialist field, and yet any available manager tends to be assigned the role. This is such an important part of an SME’s business; I thought there was room for an expert.”

The reality was far more complicated. “Having a list wasn’t enough. Business doesn’t work like that. You need to prove yourself in the market before people will trust you. I had to go from company to company. I’d been a sales rep earlier in my career, and I was back to doing what I’d done then: I was knocking on doors, explaining what I did. I heard ‘no’ 15 times for every yes, but I didn’t let that deter me. I stayed focused. The most important step is to get started.

“You need to be brave. You have to find the courage to go out and sell yourself as the brand you’re planning to be, not what you are at the moment. You can’t be dishonest, but you do need to sell your vision. I had a plan and everything worked around that plan. It was painstakingly slow in the beginning, but I kept plugging away and knocking on doors until slowly I built up a client base.”

The benefits of client referals

Arnoux signed his first client, Yankee Diners for a retainer of R780 per month. For that princely sum, Arnoux gave his client the full benefit of a vast experience in labour relations that a full-time employee would provide at a cost-to-company of R50 000 to R60 000 per month.

The owner of Yankees had a friend who ran a butchery. His referral secured Arnoux his second client. He was essentially the in-house HR manager for two businesses while he focused on selling and completing his labour law studies at night.

“I was determined to become the expert in this field. South African labour law is complex, but if you’re prepared and understand procedures and legislation, you will always be on the right side of the Commission for Conciliation, Mediation and Arbitration (CCMA). This was the function I performed for my clients”.

Arnoux was soon consulting for clients and dealing with human resources cases that had been taken to the CCMA. After a year he was providing consulting services to companies in the areas of fair labour practices, labour legislation and industrial relations.

“I knew that to build a name for myself in this industry I needed to take a big risk. In the early days of a start-up you’re in make-or-break territory, so I went big and put everything on the line. I guaranteed clients that we would pay the settlements if we lost a case – provided we were involved in the process from start to finish.”

Going all in when you’re starting out

Arnoux admits that although he still takes risks today, he doesn’t bet the business on them — not with 7 500 full-time employees relying on his company. But those start-up days were different. He needed to go all in, and the result was that he never lost a case. He made sure he was prepared and up-to-date with all labour legislation.

“There are two things you need to prove in every labour dispute: Was the case procedurally correct and was the sanction substantively fair? If you can prove these two things, you’ll win. If you can’t, you either haven’t followed procedures correctly, or you’re in contravention of South Africa’s labour legislation.”

It was 2011. Labour broking and outsourcing were big business in Europe and the US, and Arnoux’s own experiences showed him the benefits of the industry. However, it was at this point that he realised he needed to go back to the drawing board. In no way should he be considered a labour broker or temporary employment service. In South Africa, labour brokers weren’t yet persona non grata, but the writing was on the wall.

Arnoux firmly believed in the concept that companies should not employ their own employees though. “It’s such a specialist field — managing a workforce involves recruitment, HR, processes, management and so on — these are all highly specialised, and yet managers who are specialists in other fields are tasked with them.”

Time to pivot

Arnoux had another problem as well. There was a loophole in labour legislation that all consultants at the time exploited. The law said that a company employee had to represent the company at a CCMA hearing, so that outside consultants couldn’t. The loophole? Accept temporary employment and handle the hearing anyway.

By 2012 this loophole was closing. Arnoux’s entire business model was built on the fact that he would personally be at each hearing, handling the full process. Add to this the fact that Namibia had outlawed labour brokers, even going so far as to jail some directors, and South Africa was heading in a similar direction, and he knew it was time to radically change his model. The question was, to what?

Ultimately, this question and the sheer volume of mediation and CCMA cases Arnoux was handling for clients would lead to the start-up’s first subsidiary, Innovative Staffing Solutions, in 2013. Assuming the responsibility and accountability for each clients’ labour needs, ISS was not a labour broker, however, it did grow from a labour law consultancy into a full-scale outsourcing company, boosting turnover growth thanks to the pivot.

Start-up Lessons

Offer advice and share your expertise freely. The more your clients are educated, the more empowered they will feel, and the more they will view you as a trusted advisor. I gave my clients material to help them develop the best labour policies and procedures. It didn’t make my service redundant — it built trust between us.

Don’t hold back when you’re a start-up. You’ll need to change this down the line, but in the early days, you’re building a brand and relationships. You need to give as much of yourself as possible to achieve this. Later you can find ways to build what you do into systems and processes others can follow.

Don’t be emotional about your business. Entrepreneurs tend to be very emotional, and this leads to subjective decisions that aren’t always best for the business. Treat employees well, understand their side, but make a business decision and move on. Always ask the question, is this the best decision for what the business needs? Remember, it’s also your duty to support the majority of your employees who rely on the business doing well. Sometimes that requires tough choices.

Never stop learning. This is important throughout your business journey, but particularly as a start-up. The more you’re able to build your expertise, the more gravitas you will have with clients and prospects.

The pivot

Business is managing your risk – even if that means changing the business

Many large successful businesses have failed because they didn’t see the landscape changing. Technology, legislation and community pressures have all played hugely disruptive roles across various industries over the years, resulting in the now standard business phrase that businesses need to ‘adapt or die’.

Unlike many other businesses, Arnoux did just that. He took his business apart and re-engineered it before he became a casualty of the times.

“I pulled a big white board into my office and started mapping two things. First, how do we ensure that we are truly a staff outsourcing company, and second, what challenges were we facing as a business? Where did these intersect, and how could we develop solutions that addressed both areas?”

The exercise revealed a number of key points that would ultimately help Arnoux develop the business model Innovative Solutions Group has today. Within a year his turnover went from R20 million to R32 million based on the new model, and four years later this has grown exponentially to R780 million.

Re-evaluating your business

The lesson? Never take anything for granted. Arnoux was forced to evaluate his business and industry, which led to real solutions. Too often, businesses do what they’ve always done — or an industry has always done — simply because that’s the way it’s always been done. If you want to grow, you need to start challenging those assumptions.

In Arnoux’s case, the exercise revealed the following key points, some were strengths, and some were weaknesses:

CCMA commissioners were becoming stricter about consultants representing companies at the CCMA. The loophole his company relied upon was closing.

Arnoux was making large, sweeping promises to protect clients. As the business grew, the risk associated with these promises was no longer acceptable.

As an extremely competitive individual, Arnoux wanted to achieve higher growth than the company was currently delivering — he knew he’d need a different model if he wanted to exceed his current results.

On the positive side, labour legislation is an ever-growing field of inter-connected laws. Only an expert dedicated to staying up-to-date can understand them all.

Understand your business and your industry

Arnoux didn’t just analyse his own business — key to the exercise was understanding the difference between staff outsourcing and labour broking as a whole.

“I started by researching labour broking internationally. What were the roots of the bad sentiments around labour broking in South Africa, and why had Namibia criminalised an entire industry?

“I realised two main things: Locally, a labour broker is actually recognised as a temporary employment agency. This brings with it a host of problems. First, temporary employers can do what they want. Limited duration contracts don’t need to give you notice. There’s no protection for employees, and this was at the heart of the problem for trade unions.

“I then reviewed what we did — we focused on payroll outsourcing and admin, labour law, and contractor pack outsourcing, which included recruitment. These are specialised, intense functions. I looked at everything relevant to the function, including invoicing and a cost analysis for us and our clients. How could we get employees off the books of employers without the labour broker function, in such a way that employees are protected, companies are protected and we offer a sustainable solution to both parties?”

Ask around to find out all the answers

To answer these questions, Arnoux went out into the field. “I approached one of our engineering clients and played open cards. I knew I needed to understand the problem from all sides. I let him know this was an idea that was still in development phase, and then I asked him if he’d be willing to be our guinea pig. We called it ‘staff management’, and developed a system that ensured we were the employer of a pool of employees rather than our clients. This starts with who an individual takes instruction from, and who they believe they report to.

“In our test case, we took over the full employment of 63 employees. I personally negotiated with their union, so that everyone was on board. We were not temporary employers, but full-time employers — everyone had a permanent contract with all the benefits and legal protections that come with full-time employment.”

Take the time to get the strategy right the first time

This signalled the birth of Innovative Staffing Solutions, and within two months Arnoux’s client referred him to another business. Although the owner was sceptical, he agreed that Arnoux could take over the employment of 103 of his 160 employees.

The third company Innovative Staffing Solutions secured was in Middleburg, and had close to 300 employees in the hospitality and agricultural sectors. Today, Innovative Solutions Group employs 7 500 people based on this model.

“Every site we manage has a contract manager, and in-house IR and HR functions are their responsibility. They also have administrative support based on the size of the site. The contract manager is completely responsible for our employees on the site. The client goes to them. For example, if the client plans to plant 500Ha, they do the ops planning, but the manager gets the employees inducted, ready and briefed on the ops planning.”

Lessons in Pivoting

Is it riskier to stay the same or to change? All business is a risk, and we tend to resist change as a result. Often however, it’s even riskier to stay the same. Only 40% of our initial clients moved over to Innovative Staffing Solutions’ model, but the word-of-mouth referrals we received from that 40% based on the new offering skyrocketed our growth.

Market your offering in a way that customers understand what you do. It’s easy to come up with fancy terms and names. If your customers don’t understand exactly what you do though, it’s meaningless. We called our solution Staff Management because it let everyone know exactly what we did. We could have used a sexier name, and no-one would have understood what Innovative Staffing Solutions was.

Business is all about managing risk. I believe you need to take risks to grow, but you also need to mitigate them as much as possible. You can’t foresee all problems and plan for all eventualities, but you can evaluate all the risk factors within your operations. Based on this, develop a solution to nullify risk functions and implement methods to minimise risk as much as possible.

Focus on cash reserves. We’ve always banked a percentage of income to save up for retrenchments. This is a legislative requirement, and it’s essential for all businesses. You never know what’s headed your way, and how cash reserves will protect you.

Communication is key, but results are more important. I often hear business owners talking about how important it is to be transparent with clients. I agree. But I also think results are more important. If you make a promise, stick to it. Make it a non-negotiable, instead of thinking that as long as you’re transparent it will all be okay. Your promise influences the operations of your client. Rather plot and plan properly to ensure delivery, and then you won’t need to be transparent about problems.

Don’t sell services; sell a solution. When you sell a solution, you’re talking about your client’s needs, instead of what your business does.

Operations are the bedrock of any business. We are operationally strong. 60% of what I do today is operationally focused. We plan extensively, which means we are always prepared. I train the contract managers, and I wrote the procedures and training manuals they use.

Scale-up for growth

What do our clients need? What do we need? What do our employees need?

Shortly after the birth of Innovative Staffing Solutions, Arnoux recognised that if he wanted to aggressively scale the business, he would need to offer his clients solutions across the labour spectrum. He didn’t want to do this through Innovative Staffing Solutions alone, but rather through specialist divisions that could work together and share client bases.

“We needed strong foundations in place before we could aggressively start scaling the business, but by 2013 I was confident that we had the right systems in place and the company was running smoothly. It was time to spread our wings.”

At that stage, Innovative Staffing Solutions outsourced its accounting function to a small entrepreneurial accounting firm. “I already knew that I wanted to start a group of companies, of which Innovative Staffing Solutions would be one division. The vision was to offer all labour and human capital related solutions under a roof. However, I recognised that it’s easy to be seen as a jack of all trades and master of none, and wanted to avoid that perception.”

Employee experts to head each division

The solution was to ensure subject matter experts ran each division, and the best way to do that was to purchase existing companies and bring them into the fold, rather than starting from scratch. “In this case our accounting firm already had all the necessary registrations in place as well as an existing client base.”

The firm joined Innovative Staffing Solutions, and Arnoux created a holding company, Innovative Solutions Group, with two divisions: Innovative Staffing Solutions and Innovative Accounting Solutions. Both operated as independent companies with their own client bases, and as entities within a group. By bringing the accounting function in-house, Innovative Solutions Group was also saving on costs — a saving that would increase, thanks to economies of scale.

The next company to join the fold was a small BEE consultancy, and the subsidiary Innovative BEE Solutions was formed.

Ask the questions that keep your business growing

Today there are 17 subsidiaries in the group as a whole. Some offer services to a Innovative Solutions Group client base, others primarily service Innovative Solutions Group. For example, Innovative PPE Solutions was created because it made more financial sense for Innovative Solutions Group to source personal protective equipment for its 7 500 employees itself than to outsource this essential function to another company.

“Our focus has always been three-fold: What do our clients need? What do we need? What do our employees need? That’s how you grow; you need to keep asking these questions.”

Growth does not come without its challenges, and Arnoux’s acceptance of a certain level of risk to scale the company has led to some extremely challenging situations that Innovative Solutions Group has needed to weather. One of the first clients signed to ISS in 2012 ended up costing the business R3,6 million one year later. At the time, the loss was the equivalent of 10% of the business’s annual turnover.

“Our process was simple: We paid our payroll, invoiced clients, and they paid us. One year into the contract, and the client in question cancelled our service — without paying us the final month’s salary bill. We carried the entire R3,6 million payroll ourselves.”

The dangers of one big client

This hit the company hard, but it also raised a very real problem for Arnoux and his general manager, Liza Trollip. “We realised that 40% of our sales came from contracts and subcontracts of our biggest client who insisted everyone he worked with used us. On the one hand this was great and had fuelled our growth. On the other, it was dangerous. We had a lot of eggs in one basket and needed to diversify our client base.”

There was a more immediate problem at hand though: Innovative Staffing Solutions was faced with a cancelled contract, and the employees who were, for all intents and purposes, Innovative Staffing Solutions employees.

“We immediately looped in the trade union. Some staff members wanted to go back to the client. They saw their current jobs as safe. We were happy to agree to that without implementing restraints of trade. We promote job security, and you need to live by that, even if it means losing good employees — the ethos comes first.

Keep everyone in the loop

“We then let the union know that we had some positions we could redeploy people into at other sites, but we didn’t have positions for everyone. The union was clear that they had agreed to our business model in the first place because we promised job security. We knew we had to make this work. That trust is the foundation of our business. You don’t mess around with bargaining councils, and for us, that relationship is sacrosanct. We couldn’t break our word simply because we’d run into an obstacle, even if it was a big one.

“We ended up with 10% of the workforce whom we couldn’t immediately place, and we carried their salaries until we could. That’s 32 employees who we had on our books without positions.”

As it turned out, having 32 staff members who could start immediately worked in Innovative Staffing Solutions’ favour, and today the company always has a few extra people on its books.

Look for solutions to ensure growth

The lesson? If you’re serious about business growth, look for solutions, don’t dwell on the problems — and learn from every challenge you face, it might just provide an unexpected opportunity.

In the case of Innovative Staffing Solutions, this incident cemented trust between the company and the trade unions it works with. It also allowed Arnoux to approach his clients, explain their situation, play open cards that he would be having cash flow issues while the company recovered, but also showed the lengths the business would go to protect its employees and retain good relations with the trade unions. Word of mouth referrals were boosted as a result.

“We started receiving calls from companies we’d never heard of because of the efficiency and professional way we dealt with this. We got smacked to the tune of R4 million, and instead of liquidating, we kept employees on our books and labour relations good; everyone was happy.

“The result was that business owners knew we would protect them, and that we were fighters. We even had to say no to contracts because they were coming in faster than we could open offices around the country to support them. Everything happens for a reason, provided you know how to capitalise on the opportunity.”

Scaling Lessons

When you’re challenged, don’t mope. Look to the future instead. It’s easy to get swept away by emotions and rush to solve problems. We took a completely different stance when we had to cover R3,6 million in lost revenue. We focused on the business problem first, instead of rushing to litigation with our ex-client. Focus on the problem, and most importantly, find a solution. If you can do that, you’ll always continue to grow and open new opportunities.

With big negatives come big lessons. When we get thrown in the deep end, we look for solutions. We always have, and it’s allowed us to expand beyond our operational depth.

Never give up. The uphill battle I faced during my start-up years taught me to never give up, which has been critical in building this business. We suffered three months of hardship, wondering if we were going to make it. But we had worked so hard to build this business, and wouldn’t quit. That tenacity saw us through.

What you put in is what you get out. As an employer, we’re strict, but we give back as well. If you’re willing to work hard, you’ll be rewarded. For example, we run a regional competition where the best drivers on our books win a Chevrolet Utility vehicle.

How do you build a disruptive business while also focusing on growth? Disruptive ideas are by definition new and unknown to the market. They defy traditional and established solutions and ways of doing business, and they require the market to be educated before you can really onboard clients or even sell your product or service.

The answer is to build parallel solutions: Business units that bring in revenue while the more disruptive ideas are being developed and introduced to the market. Here are the four top lessons the founders of the Pivotal Group have learnt while building their business and pursuing disruptive opportunities simultaneously.

1. Know who your competitors (and potential competitors) are

Great ideas that are economically viable and solve a need that consumers are willing to pay for are few and far between. Great ideas alone are a dime a dozen, but if you’ve spotted a need, chances are someone else has as well. You then need to step back and critically evaluate why someone else hasn’t done this before; if they have done it and they’ve failed; or if you’re entering shark-infested waters riddled with competitors.

Once you’ve determined there is a gap in the market, you need to evaluate who your potential competitors are, and the impact if they suddenly started offering a similar solution to the market.

For Paul Hutton, Bruce Arnold and Joel Stransky, the founders of OneVault, competition was always a factor, particularly as a start-up, and given that potential competitors included Bytes and Dimension Data, this was a very real factor to consider. After careful analysis, however, the founders decided to go for it. Their differentiator was their business model. They wouldn’t be selling OneVault as a software solution, but as a service.

The idea had taken root while Paul was still CEO of TransUnion Credit Bureau. “I came across voice biometrics in Canada. There’s been a surge in identity fraud around the world, and I really understood the value of voice recognition as a verification tool,” he explains. “It can’t be faked, and it’s the only remote biometrics solution available, because you don’t physically need to be there to verify yourself.”

Paul had presented the idea to Transunion’s global board, and while they were intrigued, nothing came of it. “TransUnion’s model is to buy companies that are experts in their specific fields, not launch a new disruptive division from scratch.”

But this meant there was an opportunity for Paul to pursue the idea independently. Joel (former MD of Altech Netstar and CEO of Hertz SA) and Bruce (formerly Group CFO of TransUnion Africa and CFO at Unitrans Freight) were immediately interested in partnering with Paul. Both wanted to pursue entrepreneurship, although neither could do so immediately. The commitment was enough for Paul to get directly involved and start working on the business while he waited for his partners to join him.

In January 2011, Paul and Joel travelled to the UK and started investigating voice biometric solutions. “Voice biometrics was fairly new, but good technology was available, and there were global leaders in the sector,” says Joel.

It was important to choose the right product for the South African market, as this would form the basis of their offering. A contact at Dimension Data (one of whom became an investor in the business) offered this simple and straightforward advice:

When you’re choosing a technology partner, go with the company whose tech you’re confident in, and whose leadership is stable. You’re basing so much on this company and their longevity, so don’t disregard this criteria.

For Paul, Joel and Bruce, a US-based company, Nuance, ticked those boxes. But, from a competitive perspective, OneVault wasn’t the only potential player in the market. “Neither Bytes nor Dimension Data had gone into voice, but they had the potential to do so,” says Bruce. “The products were available to them through their partners.”

To mitigate this very clear risk, the founders made two critical decisions. “Our intention was to sell voice biometrics as a service, instead of a software solution that customers bought and owned, with the necessary infrastructure to go with it. The idea for OneVault was that there would be one place where your voice print lived, and different businesses could plug into our solution.”

The business model of large technology players in South Africa is to sell integrated software solutions, so OneVault’s business model was a differentiator. The next differentiator Paul, Bruce and Joel focused on was becoming specialists in their field.

“This is Paul’s baby,” says Bruce. “We’ve needed to build up a niche, expert team that specialises in voice biometrics. Because we aren’t generalists, 100% of our focus goes into this, instead of 5% or 10%.”

To attract the best in their fields, the founders needed a very appealing culture and a strong recruitment strategy. “We focused on what we wanted from our work environment, and then applied the same rules across the business,” says Joel. “Our goals were to drink good coffee, have no leave forms — ever; be able to take the time to ride our bikes and watch our kids play sports. If someone can’t make it work, or takes advantage without putting in the work, they come and go, but on the whole, we’ve had extremely low churn, and we’ve attracted — and kept — incredible talent.”

This differentiator would prove to be important for two reasons. First, two and a half years into the business, with investors on board and having pumped a significant amount of their own capital into the business, the team hit a major stumbling block. For a few weeks, they didn’t even know if they had a business.

“We had been operating on one major, and as it turned out, faulty, assumption,” says Paul. “We thought South African companies had the right telephony structure to implement our solution. We’d been building our solution on top of Nuance’s software, and were ready to start piloting the entire system with a few key customers, and we found out that in order to meet global voice biometric standards, the telephone technology had to be G711 compliant. South Africa was operating on G729.”

This was OneVault’s make or break moment. The team had six weeks to come up with a solution that ensured it met the necessary levels of accuracy. Without a highly skilled team this would have been impossible.

Even as a start-up, the strategy had been to only bring the best of the best on board. “We didn’t interview,” says Bruce. “We approached people whom we knew. We approached the best in the industry, and convinced them to take a chance with us. There was risk, but there were also rewards.” One of those people was Bradley Scott, a brilliant engineer whom both Paul and Bruce had worked with at Transunion.

Today, OneVault is one of the most specialist companies in the world, and often asked to speak at events in the US.

Being the niche specialists paid off, and OneVault achieved the almost impossible. But this had its downside.

This was the second reason why being such focused, niche experts paid off. “We demo’d the solution for a large local corporate, they loved it, and then went to a ‘then’ competitor to implement it,” says Paul.

“We always knew this was a real danger. Players like Bytes and Dimension Data have solid, existing client relationships with the same companies we’re targeting.”

18 months later the project still wasn’t working. “This is deep specialist knowledge,” says Paul. “Knowledge we built while we created our offering.” OneVault won the contract, and developed a partnership with Bytes at the same time. Today, OneVault works with all the major software integrators in the market. “We’re a specialist service they can offer their clients, without needing to put the same time and energy we needed to put in to become the specialists.”

Through a focused strategy, OneVault has become a partner, rather than a competitor, of some of the largest players in the industry.

2. Understand the nature of disruption so that you can prepare for it

In today’s ever-changing and fast-paced business world, most business experts are in agreement that as a company, you’re either the disruptor, or you’re being disrupted. The problem is that disruption comes with its own set of challenges.

“Our entire business model was built around a subscription service. Instead of a company buying a software solution, installing it and running it internally, we would do all of that. We would carry the infrastructure burden, and the high upfront cost,” says Joel.

In theory, this sounded like a clear win for businesses that would benefit from a voice biometrics solution. The reality is never so simple, particularly when you’re a disruptor.

“The software is expensive, and so we thought this would be seen as an excellent solution,” says Paul. “Instead, we faced a lot of reticence over the cloud. Businesses didn’t trust it yet.”

On top of that, first movers are often faced with a lag in corporate governance guidelines. As technology becomes more sophisticated, so governance guidelines change — but it’s a slow process, and the lag can impede disruptors.

“You also can’t give proper reference cases, because it’s all brand new to your market,” says Paul. “The best we had was a case study of how well it had worked in Turkey.”

To compound matters, proof of revenue is essential for businesses wanting to trade with large corporates, but non-existent in the start-up phase.

So, what’s the solution? According to Joel, Bruce and Paul, it’s all about being patient, never giving up, building gravitas and getting a few clients on board, even if it’s free of charge to build up your reputation and prove your concept. Finally, you need to bring in revenue from more traditional channels to support your disruptive products and solutions.

“Disruptive solutions are by their nature new and different, which means change management for your customers. This makes the sales cycle long and complex, and you have to be prepared for that,” says Bruce.

Don’t stop laying your groundwork. While disruptors are ahead of the curve, you need to be ready for the uptake when it arrives. “We’ve now concluded a partnership with South Africa Fraud Prevention Services,” says Paul. “When an imposter calls we won’t only terminate the transaction but we will alert the identity being compromised in the attempt and we will actively prevent fraud by contacting Fraud Prevention. The ultimate vision is for every South African’s voice biometric signature to live in our vault, and we are already receiving imposter information.”

3. Cultivate additional revenue streams

So, what do you do while you are living through the extremely long sales turnaround time of your disruptive, game-changing solution? Bills still have to be paid and investment is needed to develop truly disruptive ideas.

First, the team realised that while an annuity subscription service was their ultimate goal and where the industry was heading, initially they needed to be able to sell and implement the software.

It’s worth noting that one of OneVault’s earliest customers who bought the software has since launched a new business, which is on OneVault’s annuity service model. The shift has just taken time. “The change is happening, but it’s been slower than we anticipated,” says Bruce. “We needed to accept that fact and sell the software to bring revenue into the business while we were waiting for the market to catch up.”

It’s an important lesson. You don’t want to get distracted from your vision, but you need to be bringing in revenue, even if that means your short-term strategy differs from your long-term goals.

“It took three years before we really started seeing a move towards hosted solutions,” he adds. “Outsourced and offsite solutions are opex environments, not capex. They are more cost-effective for customers, but they require a shift in thinking. It’s a move away from how things have always been done, and that takes time.”

But, while Paul, Bruce and Joel were learning the art of patience, they also needed to start bringing revenue into the business.

“It was clear that we needed to find other opportunities,” says Joel. The result is the Pivotal Group, a diversified holding company with different businesses that are interlinked and complementary.

The group’s first business outside of OneVault, Pivotal Data, was based on a large call centre contract Joel, Paul and Bruce secured. “You can’t be an expert in everything – when you specialise you will always be more successful. The trick is to partner with other experts,” says Joel. In this case, three entrepreneurs were opening a call centre — this was their area of expertise; they were absolute subject matter experts. What they weren’t experts in was technology or facilities management. Instead of doing it themselves, they were looking for partners.

“We manage everything aside from the people element,” explains Joel. “We found and leased a building, built the bespoke workspace, put in the technology, and managed the facility and IT on an opex basis back to them.”

The business immediately had a good anchor client, and Pivotal Data has built on that. The annuity income has supported further growth.

“This was a base for us, but we’ve acquired a few businesses on the back of this success, and created our own cloud contact centre solution — which also feeds into what we’re doing with OneVault,” says Bruce. “Our vision is to create a technology stack that’s world-class and provides a range of services that no other businesses provide as a single solution.”

Because of this pivot into call centre management, a new opportunity has presented itself, and Pivotal’s ambition has grown to include a solution that calls, authenticates, and then analyses all the data that is collected during those calls.

“Through partnerships, my team has developed a predictive analytics system that gives contact centres deep diagnostic tools. We can predict why agents are having the conversations they have, and what to tweak to improve them. We see the agent’s problem before they do. This isn’t just value add, it’s a revenue generating tool if it improves lead conversion rates and customer service. It’s also all geared to lowering call volumes.

“We know we need to keep looking forward. OneVault is starting to gain real traction, but we need to be working on the next disruptive solution and model. We can’t sit back and relax,” says Bruce.

“Three years ago we said that’s it; no more start-ups or investing in pre-adoption phase businesses. From now on, everything we do will be revenue generating,” says Paul. “We’d stretched three years of runway to five years in OneVault, and we didn’t want to keep doing that. We wanted instant revenue businesses. And the very next thing we did was invest in a start-up. It’s a crazy space, but it’s also very rewarding.”

To sustain it, the group continues to grow, focusing on investing in businesses and entrepreneurs who are subject matter experts and therefore already know and understand the market, and then positioning each new business or service to plug into the current offering.

4. Be open to new ideas and opportunities

Integral to the Pivotal Group’s positioning is Paul, Bruce and Joel’s focus on supporting other business owners whose offerings align with the group’s own growth goals, and who would benefit from joining a group.

“If your goal is to be disruptive, you need to be open to all kinds of new ideas,” says Joel. Some will be better than others, and the co-founders have made the decision to focus on the ‘jockey’ rather than the business as a result. Business offerings and ideas need to pivot. If you have the right partners, finding a solution is all part of the challenge.

Pivotal’s move into the world of artificial intelligence is due to one such partnership. “One of our clients approached us with a concept. But he needed a partner to develop it into a proper AI solution,” says Joel.

It’s an augmented intelligence solution that focuses on recruitment, talent management and career guidance. The solution screens, ranks and matches candidates against a job profile, or a number of profiles. It’s a multidisciplinary platform that predicts the performance of the individual in a role.

“Our partner is a former Accenture consultant and a leader in this field. His focus is on the IP and science of the product, ours is on the business component.”

The challenge is how to commercialise and scale the business in as short a time frame as possible. Like many disruptive products, the adoption process is a stumbling block. “We invest at the pre-adoptive curve — not at the revenue generating stage, which means a big focus is always on how we can take an idea and build it into a revenue generating business,” says Bruce.

The business uses capital selectively. “We want to invest in and drive our own agenda,” says Paul. “We’re in charge of our own destiny, but it’s not comfortable or simple. We came from corporate. Big machines that you need to direct and keep on course. This is an entirely different challenge and we are still learning.”

Vital stats

About: Afritorch Digital assists research agencies in conducting market research through its in-depth knowledge of the African continent and its use of the latest digital technologies.

There is a saying that goes: It takes years to become an overnight success. While a company or individual might seem to enjoy sudden (and seemingly effortless) success, there is often more to the story. The results are usually public and well-publicised, but the years of hard work that came before go unnoticed.

Local start-up AfriTorch Digital is a great example of this. Since launching in May 2017, the business has seen excellent growth. “To be honest, we were very surprised by the level of success. Things progressed a lot quicker than we anticipated,” says co-founder Thabo Mphate.

“All the goals we had hoped to reach in four or sixth months, we managed to hit in the first month. It was just amazing.”

Preparing to launch

While AfriTorch Digital has certainly seen quick growth and success, it would be a mistake to assume that the same is true of the two founders. For them, the creation of AfriTorch was years in the making.

“The goal was always to start our own business,” says Thabo. “I think we’re both entrepreneurs at heart, and we saw an opportunity to create a unique kind of business that offered an innovative solution to clients, but we also realised the value of getting some experience first. Without the knowledge, experience, network and intimate understanding of the industry landscape, getting AfriTorch off the ground would have been incredibly difficult.”

Entrepreneurs tend to dislike working for other people. They want to forge their own path. However, as AfriTorch Digital’s case illustrates, spending time in the industry that you’d like to launch your business in is tremendously useful.

“Finding clients when we launched AfriTorch was relatively easy,” says company co-founder and CEO Michel Katuta. “One reason for this, I think, was that we were offering potential clients a great solution, but the other was that we had established a name for ourselves in the industry. People knew us. We had worked for respected companies, and we had done work for large clients. So, when we launched, we were able to provide a new start-up with credibility in the industry.”

The Lesson: Becoming an entrepreneur doesn’t always start with the launch of a company. Spending time in an established business, gaining experience and making contacts, can be invaluable. Very often, it’s the relationships you build during this time and the knowledge you accumulate that will help make your company a success.

Solving a problem

Everyone knows that launching a successful business means solving a burning problem, but what does that mean in practice? Aren’t all the burning problems already being addressed? And how do you attempt this without any money?

Thabo and Michel identified a small group of potential clients with a burning problem. Crucially, it was a problem that no one outside of the research field could have identified. Having spent years in the trenches, they saw a massive gap waiting to be filled.

“A decade ago, researchers were still debating whether the future of the field was in the digital space. That debate is now over. Everyone agrees that online is the way to go. What once took months now takes days or hours, and the cost of research can be reduced by a factor of five,” says Michel.

“But researchers are not technology specialists. If made available, they are eager to adopt digital tools, but they aren’t eager to develop these tools themselves. That’s not their area of expertise.”

AfriTorch Digital stepped up to provide these tools. Katuta has a background in software engineering, so he could approach research problems with the eye of a tech specialist. Very soon, research agencies were lining up to make use of AfriTorch Digital’s services.

“We work with research agencies that conduct research on behalf of their clients. We provide the digital tools needed to conduct research online, and we provide the online communities. A big reason for our success is that we understand Africa. A lot of companies want to conduct research in Africa, but traditionally, this has been very hard. There was a lack of access and a lack of infrastructure that made research very hit-and-miss. Thanks to the continent’s adoption of mobile technology, it’s now much easier. If you have the technological know-how and an understanding of the environment, you can do amazing things,” says Michel.

The Lesson: Find a niche and own it. Research agencies might not have seemed like an obvious and lucrative market, but having spent time in the industry, the AfriTorch founders were able to identify clients who would be desperate for their offering. Spending time in an industry will help you see where the opportunities lie.

Take note

Before launching a business, get to know an industry from the inside out. This will give you an unparalleled view into gaps you can service.